Electronics import may rise due to smartphone-led surge

Led by a surge in smartphone shipments, India’s electronics imports could for the first time exceed overseas purchases of bullion this year, highlighting an urgent need to direct the focus of the ‘Make in India’ initiativeET Bureau | Updated: October 20, 2015, 12:59 IST

Researchers from the Fraunhofer Institute for Secure Information Technology SIT will be demonstrating their ShareKey software.By Kirtika Suneja

Led by a surge in smartphone shipments, India’s electronicsimports could for the first time exceed overseas purchases of bullion this year, highlighting an urgent need to direct the focus of the ‘Make in India’ initiative on the sector.

Imports of electronics exceeded those of gold and silver in the first six months of the current financial year, estimates based on government data showed, adding up to over $19 billion. While a decline in gold imports contributed to the trend, the rapid rise in demand for electronic goods also played its part.

From about $28 billion in FY11, import of electronics could rise to $40 billion FY16.

For some months now, electronics have edged out gold, machinery and pearls to become India’s second-largest category of imports, after oil.

Although India is one of the fastest-growing consumers of electronics globally, domestic production of such goods was only $31 billion during 2014-15 – 1.5 per cent of global output – against a market estimated at $70 billion.

“There is bigger concern as real electronic imports are much more than what is captured. Electronic components of cars such as electronic gears are still not counted, else these would take the import figure to a much higher level,” said Ajay Sahai, director general of the Federation of Indian Export Organisations.

Electronic goods imports grew from $2.85 billion in May to $4.38 billion in September, led by a sharp rise in purchases of integrated chips and personal computers, among others, and putting a question mark on the success of the government’s target of ‘net zero imports’ in electronics manufacturing. In April-August, mobile phone imports were pegged at $2.4 billion. In FY15, India had imported $7.9 billion worth of mobiles.

While the government expects demand for electronics to cross $400 billion by 2020, the industry estimates that at the current rate, domestic production can at best be $100 billion. While some blamed the Information Technology Agreement, to which India became a signatory in 1997, for letting electronic imports flood the country and erode competitiveness, others attributed the rise to an inverted duty structure and the removal of export incentives.

“India cannot afford to import all its telecom and electronics equipment. We desperately need a high-vaulted focus on local manufacturing to reduce heavy dependence on imports,” said Saumen Chakraborty, chairman of the Electronics and Computer Software Export Promotion Council. India’s electronics exports, at $6 billion, form only 0.28 per cent of the global electronics trade. “The government talks of ‘Make in India’ but there is no change in labour laws or improvement in transportation and power availability that can encourage small and medium enterprises, which value add to imported goods to the order of 400-500 per cent,” said Suresh Madan, director of Delhi-based Ahuja Radios, an exporter of electronics sound equipment with a group revenue of Rs 700 crore.

Citing the removal of a 2 per cent incentive for electronic hardware exports to the EU, the US and most of India’s neighbours, Madan said his company’s overseas sales have contracted 35 per cent in the past six months. India sells $1.8 billion worth of components abroad and Europe is the top destination. The industry also rues the inverted duty structure that has hindered domestic manufacturing. The import of microphones has zero duty but its components attract duty of 7.5-10 per cent.Others said that while the government has given a fillip to domestic manufacturers of tablets and mobile phones by imposing a 12.5 per cent duty on imports, such benefits need to be expanded to other equipment such as small switches, routers and dongles.